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FT.com

Finacial Times:

Bosporus tanker jam threatens shortage of oil

By Carola Hoyos and Javier Blas in London

Published: January 11 2004 21:59

Mediterranean refiners are suffering shortages of crude oil as Turkish security restrictions and bad weather cause a traffic jam of tankers carrying Russian oil through the straits of the Bosporus and Dardanelles.

The congestion threatens a supply crunch similar to that experienced by European refiners during the Gulf war of 1991.

Some senior oil executives buying oil for their refineries in Spain, Italy, France, and Germany are having to reduce their operations, as they face delays of 20-25 days and daily tanker fees of $50,000 (€39,000).

The jam has forced Russian producers to halt one pipeline sending oil to the Black Sea because storage tanks are full and tanker loadings are delayed.

"The Bosporus problem is hitting very hard," said one refiner in Spain. "If you have big delays, the whole programme of the refinery system suffers. We have to go to the spot market to find another oil cargo, probably more expensive and with a quality less suitable for the refinery system."

The transit route of the Bosporus and Dardanelles straits, one of the most important export points for Russia, Europe's biggest supplier, is known for problems and delays. But the delays this year are compounded by the fact that refiners can no longer rely on the Iraqi substitute for Russian oil.

Kirkuk oil, from Iraq's northern oilfields, resembles Russia's Urals oil. But Kirkuk, which is transported by pipeline to the Turkish port of Ceyhan, has not been available since March because of the sabotage of Iraq's section of the pipeline.

The problems have more than tripled tanker rates from the usual daily $20,000-$25,000 to $70,000-$90,000. Refiners can scarely afford the extra cost on top of oil prices 50 per cent above the long-term average.

Some European oil executives and diplomats argue that Turkey's recent decision not to allow larger tankers to t ravel through the winding strait by night was also motivated by its wish to see oil companies build a lucrative alternative pipeline in the country and speed up the construction of the $3bn pipeline from Azerbaijan.

Hilmi Guler, Turkey's energy minister, said last week: "Naturally, we do not want the straits to be used as a pipeline. We have to think in terms of both the environment and security. Oil traffic is continually increasing and we want to find a solution."

But the environmental and security risks are grave, with many believing it is only a matter of time before a catastrophe occurs. The passage leads tankers through Istanbul, and the busy commuter and fishing traffic of the area has a poor safety record.

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